Update: The jackpot for Mega Millions has increased from $900 million to $1.6 billion after the last drawing on October 19 did not produce a winner. The next drawing will be on October 23.
This story was originally published on October 17, 2018 and has been updated.
If you've ever dreamed of diving into a seemingly endless mountain of cash like Scrooge McDuck, now might be your chance. The Mega Millions jackpot is the second highest it's ever been at $900 million. It's been a while since anyone has drawn the winning numbers, so it's been piling up waiting to be won by one lucky person. Before you start imagining what you'd buy with your winnings, how much would you actually be taking to the bank? After taxes, your $900 million prize gets a lot smaller.
How much would you get to keep if you won?
This actually varies by what state, and sometimes city, you live in. Most winners, regardless of location, would be subject to federal taxes. Given the size of the jackpot, the federal withheld tax would be a whopping 39.6%. The government takes 25% of the winnings upfront, with the remaining due when you file taxes. And that's before state taxes.
For those who live in a state without income tax – Florida, New Hampshire, South Dakota, Tennessee, Texas, or Wyoming – your take home would be a lot higher than people living in other states. New York City dwellers have the steepest cut because they have to pay a city, state, and federal tax, and lottery winnings are no exception. California, Florida, New Hampshire, Pennsylvania, Washington, and Wyoming all forgo taxing lottery winnings. The best place in the U.S. that you could win the lottery is Puerto Rico. Not only do they not have a state tax on lottery winnings, but that applies to federal taxes as well.
So, just win the lottery and move to Puerto Rico? Not so fast. Unless you have already spent most of the year living in Puerto Rico, or another state that does not tax lottery winnings, you'll have to pay to the state where you currently reside.
Does it matter if I take the winnings as a lump sum or in payments?
Winners have two choices when it comes to payout: a one-time lump sum or annuity payments over a maximum of 30 years. If you anticipate wanting to go on a major shopping spree, but want to minimize the damage, perhaps annuity payments would be a better option? On the other hand, you could take it in one payment, make some smart investments, and start seeing your money work for you.
Can you claim lottery anonymously?
Lottery winners often get a lot of press attention, especially if they're taking home one of the largest jackpots in history. The idea of remaining anonymous might sound appealing if you're not so interested in your 15 minutes of fame (and all of those long-lost relatives who might want to share in your sudden good fortune). Unfortunately, most states require that you disclose your name, city, and total winnings, though there are some that allow you to opt out. According to Forbes, there are only six states that let you to remain anonymous when accepting lottery winnings: Delaware, Kansas, Maryland, North Dakota, Ohio and South Carolina.
If you don't live in one of those states and still like the idea of keeping your name out of the press, you could accept your winnings under the guise of a legal entity such as a blind trust which would allow you to maintain your anonymity.
Of course, there's a one in 302.6 million chance that this will be your problem, but what a "problem" to have. If you want to get in on the action, buy your ticket ahead of the next drawing on Friday, October 19.